Banking sector needs reform commission

Experts, bankers, academics and policymakers yesterday called for the formation of a dedicated reform commission for the banking sector, warning that years of politically backed bank takeovers, weak oversight and regulatory failures have eroded public confidence in the financial system.

The call was made at a seminar titled “Good Governance in the Banking Sector and the Role of the Media”, organised by the Economic Reporters’ Forum (ERF) at its office in Paltan, Dhaka.

Speaking as the chief guest, Information and Broadcasting Minister Zahir Uddin Swapon said the government would bring banking sector reforms under a dedicated commission.

“When commissions have been formed for the media, anti-corruption efforts, and administrative reforms, why should such an important sector be left out? We will certainly do it,” he said.

He added that good governance in the banking sector cannot be achieved without broader reforms in the state and political system. He alleged that economic data had been manipulated in the past to hide the true condition of the economy.

“Without support from the state, it would not have been possible to alter performance-related statistics and information in this way,” he said.

Swapon also stressed the need to reduce the economy’s heavy reliance on bank financing and develop a stronger capital market.

At the seminar, Mohammad Mamdudur Rashid, managing director and CEO of United Commercial Bank (UCB), said the sector is facing multiple challenges due to governance failures, although some banks have continued to perform well.

He added that the industry had also been affected by the Covid-19 pandemic, the Russia-Ukraine war and developments after August 2024.

According to Rashid, accountability and transparency are the two foundations of good governance.

“The ratio of non-performing loans rose from 11 percent to 25 percent mainly because of greater transparency. In 2025, Bangladesh Bank instructed banks to disclose the actual figures, making the true picture visible,” he said.

He also said vested interests and weak ethics contributed to current problems, adding that the media had helped expose irregularities long before they became widely acknowledged. However, he warned that inaccurate reporting could weaken depositor confidence.

Shamsul Huq Zahid, editor of The Financial Express, said Bangladesh has too many banks.

“If the economy needed 15 banks, licenses were issued for around 60. Supervising such a large number of banks has become difficult,” he said, adding that comprehensive reforms are urgently needed.

DEPOSITORS’ HARDSHIP AND REGULATORY CONCERNS

Md Shahidul Islam Zahid, professor and chairman of the Department of Banking and Insurance at the University of Dhaka, said depositors are now being forced to queue up to access their own money, which shows the depth of the sector’s problems.

“We tried to build a strong economy while hiding enormous amounts of dirt under the carpet. The question is: where were the regulators?” he said.

He criticised regulators’ role during politically backed bank takeovers and questioned why Bangladesh Bank did not raise public concerns at the time.

Referring to audit irregularities, he said some banks reported profits that later turned into losses after independent audits.

“In one case, a bank reported a profit of Tk 450 crore in 2023, but an audit later found it had actually incurred a loss of Tk 250 crore. Such manipulation involved top-tier auditors and received regulatory approval,” he said, calling for accountability for all parties involved.

Md Ezazul Islam, director general of the Bangladesh Institute of Bank Management (BIBM), said shareholders provide only about 4 percent of funds in the banking sector, while depositors supply the remaining 96 percent.

“Yet those who own just 4 percent effectively control the banks, while depositors who provide most of the funds are struggling to access their money,” he said.

He called for greater autonomy, transparency and accountability at Bangladesh Bank, urging it to fully use its legal powers.

Sayema Haque Bidisha, professor in the Department of Economics at the University of Dhaka, stressed the need for objective analysis of financial data. She also urged the media to closely monitor how the newly announced Tk 60,000 crore stimulus package is used.

As a special guest, Nurun Nahar, deputy governor of Bangladesh Bank, said most bank funds belong to depositors, who keep their money in banks based on trust.

“When people cannot withdraw their money when needed, a crisis arises,” she said.

She said some borrowers take loans without any intention of repaying them and are identified as wilful defaulters. She stressed the need for regular inspections and effective implementation of inspection reports to prevent irregularities.

She also acknowledged that many banking sector scandals were first exposed through media reports, adding that misuse or embezzlement of public money can never be justified.

Masrur Riyaz, chairman of Policy Exchange Bangladesh, also spoke at the event.

The keynote paper was jointly presented by Obaidullah Rony, special correspondent of Samakal, and Sanaullah Sakib, senior reporter of Prothom Alo.

The seminar was chaired by ERF President Doulot Akter Mala and moderated by ERF General Secretary Abul Kashem.